Economics, History, and Causation.

By Randall Morck Randall & Bernard Yeung

Economics and history both strive to understand causation: economics using instrumental variables econometrics and history by weighing the plausibility of alternative narratives. Instrumental variables can lose value with repeated use because of an econometric tragedy of the commons bias: each successful use of an instrument potentially creates an additional latent variable bias problem for all other uses of that instrument – past and future. Economists should therefore consider historians’ approach to inferring causality from detailed context, the plausibility of alternative narratives, external consistency, and recognition that free will makes human decisions intrinsically exogenous.

This paper has yet to appear in NEP-HIS but should be forthcoming as the NBER takes a bit to update its series. The paper has already been published (Business History Review, 85(1), Spring 2011).

Morck and Yeung offer a long and detailed critique of mainstream economics through its excessive use of econometrics and disregard for  work by other economists. This article touches on an interesting idea, namely the need for greater external consistency in quantitative studies.

I was hoping that along side this critique the authors would have offered something similar for historians, perhaps along the lines of what Friedman and Jones state in the introduction to that same issue of BHR. I also felt their overall argument would have been more powerful if the paper had been published in a high ranking, mainstream outlet,  the Journal of Economic History  or any other of the highly quantitative outlets in the area.

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About bbatiz

I have edited NEP-HIS since 1999 and its blog in 2010. My background is economics and business history. I am currently at Bangor Business School (Wales) and my research interests are broadly in applications of computer technology, retail banking and the cashless society.

3 thoughts on “Economics, History, and Causation.

  1. Mary Rose

    Discussion of role of history in understanding the present always interests me. A perspective that often gets missed is role of history in innovation and the relationships between path dependency and path creation.

  2. Stephen Morgan

    I am worried by the use of “high ranking” in the observation ” I also felt their overall argument would have been more powerful if the paper had been published in a high ranking, mainstream outlet, the Journal of Economic History or any other of the highly quantitative outlets in the area.” Especially so from a business historian – Business History or Business History Review would seem quite sensible journals to use. If we use the SCCI journal impact factor (JIF) as our measure of “high ranking”, then the latest rankings have shown a remarkable shift in the JIF of the main ISI-listed eco/bus history journals for 2010 published in late June 2011.

    AEHR, 0.333 (up from 0.301; still down on 2008 0.423)
    BH, 0.427 (down from 0.500)
    BHR, 0.684 (up from 0.353)
    EHR, 0.843 (it has been constant 0.840-0.850 range past 3 years)
    EREH, 0.594 (down on last year, its first year of entry in the ISI)
    EEH, 1.222 (up from 0.576)
    JEH, 1.042 (up from 0.691)

    ‘Small’ journals (many in the social sciences are largely so) tend to have big swings in their JIF year to year. Overall, though, excessive reliance on JIF as a measure of impact or rank is unwise, and even unsound, if you closely examine its calculation. Regrettably it is the most conveniently available metric for ranking, and people readily use it. I suggest all scholars should look at the work on citation and journal ranking of my former colleague at Melbourne, Anne-Wil Harzing ( for some sensible advice on how to use JIFs, consider ranking and develop one’s own citation profile.

    Stephen Morgan (Nottingham)

    1. bbatiz Post author

      Thanks for yours Stephen. Point taken. What I meant is that, in a way, publishing a critique of over use of quantitative methods in a largely qualitative journal is like “preaching to the choir”. I was thinking along the lines of of Akcoff’s “The Future of Operational Research is Past” (The Journal of the Operational Research Society,3(2), pp. 93-104, 1979), which is a critique, from within, on the loss of interdisciplinary and the over use of quantitative methods.

      Again, I expected something that would address the other side and balance the argument, sort of “building bridges”. For instance, they could have built on the bit I mentioned from Friedman and Jones which is part of the introduction to that same issue: “We also hope to receive articles that make use of creative and rigorous methodologies. Business history is a field that has accumulated a vast amount of empirical data, …” (BHR, 83(1), p. 2, 2011).


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